The annual average price forecast for Brent crude oil is expected to be $65 a barrel in 2019 and $68 a barrel in 2020, Wood Mackenzie has said in its latest report on Monday.
Despite the weakening sentiment about the global economy, oil demand growth remains robust, for now, the report added. On the other hand, it continued, supply growth is also slowing.
“After an estimated increase of 2.5 million barrel per day (mbd) in 2018, global supply is forecast to grow 1.4 mbd in 2019 and 1.8 mbd in 2020. This assumes OPEC continues to restrain production through end-2020. With non-OPEC supply expected to increase, the OPEC+ cuts are critical to prevent significant oversupply,” the report noted.
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Wood Mackenzie report said global markets were volatile heading into the new year. Oil has been no exception, with Brent trading between $62 per barrel on 7 December 2018 before falling to $51 on 21 December.
Mixed macroeconomic data have driven much of the volatility, with political uncertainty compounding concerns of a sharper than expected economic slowdown.
Since trading resumed in January, the oil market has rebounded as the impact of production cuts from producers such as Saudi Arabia started to be felt, it noted.
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“However, the market remains focused on the demand outlook, and there are a number of risks to the global economy that could depress the modest growth we forecast in oil demand and dampen the oil price outlook,” Wood Mackenzie report added.
“Wood Mackenzie expects a benign global economic slowdown, with global GDP growth decelerating from 3 percent in 2018 to 2.8 percent in 2019 and 2.6 percent in 2020. In our base case, we expect global oil demand to grow 1.1 mbd in 2019 and 1.3 mbd in 2020,” said Ed Rawle, Wood Mackenzie’s chief economist.
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